Article;
India's return to 8% growth rate is unlikely to happen before 2014-15
Comment
;
The only thing that is
holding Indian growth story back is high inflation. Inflation in India is a
structural problem. Markets are not that efficient. They take too much time to
respond to increases in demand pressure. They do not operate with sufficient or
reserve or spare capacity. Any little increase in demand is likely to upset the
supply conditions. Prices are very sensitive under these supply conditions. I
hope FDI in multi brand retail would help removing supply side bottlenecks and
consumers (we all consume but we all do not produce or supply) would be
benefited in form of lower prices. As far as the question of expected growth
rate of Indian-Economy is concerned i’m sure economist would not have expected
a growth rate lower than 7-8% if RBI had lowered the key interest rate-repo and
reverse repo rates- by 50-100 basis points. One more thing that any central
bank takes into account is unemployment rate. If unemployment increases, growth
rate decreases and vice-versa. Only if the unemployment rate in India above the
RBIs target, RBI has some room to lower key interest rates by choosing a higher
inflation target around 10%. If it does so we can easily see the growth rate of
Indian economy around 7-8% in the next 4-6 months…
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